THE BRETTON WOODS CONFERENCE - WHAT IT CHANGED?

In 1944 at the Bretton Woods conference in New Hampshire, an international agreement was approved that led to the establishment of the International Monetary Fund (IMF) and the World Bank. The same agreement led to the definition of the system of exchange rate regulation and trade relations between the main industrialized countries that functioned from the second post-war period until 1971.

The profound devastation wrought by the Second World War had generated the widely shared need to bring lasting order to international relations. The economic history of the main advanced countries had also been marked by the great depression of the 30s, a period during which widespread protectionist practices, combined with competitive devaluations of exchange rates, had caused a rapid decline in international trade and the global economy.

In this context, the United States promoted an agreement that would guarantee the monitoring of payment flows, trade and international capital movements.

In 1944, 730 delegates from 44 nations, gathered in the city of Bretton Woods for the United Nations monetary and financial conference, after a three-week debate, reached an agreement that led to the establishment of a system based on fixed exchange rates between currencies, with the dollar as the reference currency. In a nutshell, the agreement stipulated that all currencies should be convertible into dollars and that central banks had to maintain a stable exchange rate with the dollar through open market operations. Devaluation was permitted only in the event of serious structural imbalances in the balance of payments.

The agreement also established the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank). Both of these institutions would become operational only in 1946, once the ratification of the agreement by a considerable number of countries had been achieved.

Among the tasks assigned to the IMF were those of promoting international monetary cooperation, facilitating the expansion of international trade, promoting stability and the order of exchange rates by avoiding competitive devaluations, and providing (under adequate guarantees) resources to deal with difficulties arising from balance of payments deficits. More generally, the task of the Fund was therefore to monitor monetary stability and to contribute to the re-establishment of open and multilateral international trade. Within it, each State had a decision-making power proportional to the share of the Fund's capital subscribed (one share was paid in gold and one in national currency).

Among the objectives of the World Bank, there was support for the reconstruction of Europe and Japan after the Second World War, although in the sixties the Institution also dealt with the economic development of the countries of Africa, Asia and Latin America in the process of decolonization.

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